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Zusammenfassung von Startup Seed Funding for the Rest of Us

Name: Startup Seed Funding for the Rest of Us
Rating: 4.7 (92 reviews)
Author: Mike Belsito

Mike Belsito

How to Raise $1 Million for Your Startup – Even Outside of Silicon Valley

4.7 (92 Bewertungen)

22 Min.

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Risikokapital Start-Ups

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Startup Seed Funding for the Rest of Us
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What’s in it for me? Learn how to obtain seed funding for your start-up, even if you’re not in Silicon Valley.

If you’re a company founder located outside a major start-up community, you may feel you’re at a disadvantage when it comes to securing seed funding. Odds are you won’t bump into a potential investor while you’re grabbing your morning coffee or mingling at a local tech event. But that doesn’t mean you can’t get the start-up capital you need. You just need to approach fundraising more strategically.

In these blinks, you’ll discover how to maximize your business’s appeal to potential investors. You’ll then learn how to identify and approach investors, even if you have no existing connections to them, so you can obtain the funding you need.

In these blinks, you’ll learn

the red flags that will immediately lose an investor’s interest;
which element of your business investors rate as the most important; and
what farmyard animal investors are like.

To attract investors, you need to prove your business is viable.

A-listers like Lady Gaga and Ashton Kutcher have given venture capitalism a certain glamor. If you’re a business founder looking for seed funding, it’s easy to get caught up in fantasies about which celebrity will invest in your business. But what you should be focusing on is your business plan. After all, investors back businesses, not ideas.

Even in Silicon Valley, where investors are on the lookout for the hottest new company, a start-up will only get funding if it can prove it’s a viable business. Outside Silicon Valley, the challenge is even harder. Investors beyond the Bay Area tend to be more conservative. So, unless you can demonstrate that your start-up is more than just a brilliant idea, you won’t get the seed funding you need.

Here’s the key message: To attract investors, you need to prove your business is viable.

Demonstrating your business’s viability at the start-up stage may sound impossible. After all, how can you show an investor your business is viable before you have funding to actually make it viable?

But there is a way to do just that. It’s called traction.

Traction is a method to show your business model will generate a return on investment. It will prove that your model is based on actual data and not just assumptions about how much money you’ll make.

Start by creating a financial plan that shows how every dollar of funding will result in three dollars of revenue. This will demonstrate to investors that your model is financially viable.

Next, create a prototype to show investors what your idea will look like as a product. Your prototype doesn’t need to be fully functional. You can create a mock-up or a cheap sample using a 3D printer. Or make a video that can be shared online. Entrepreneur Drew Houston used a video demo to show how file-sharing product Dropbox would work long before he created it.

Finally, line customers up by promoting your product before you launch it. Use a service like Launchrock to collect the details of people who may want to buy your creation. Tens of thousands of potential customers were on Houston’s mailing list before Dropbox was released, proving there was a market for his brilliant idea. This type of traction confirms there’s a market for your business concept. And a market is what attracts investors.

An effective pitch is relatable and emotionally engaging.

Imagine you’re an investor listening to a founder pitch their start-up. You’ve heard dozens of pitches before, and you’ll hear dozens of them again. Not many founders take the time to make their pitch stand out. They all follow the same boring pattern of making a bland statement about what the start-up does. This is a sure way of making your eyes glaze over.

To get an investor’s attention, it’s crucial to focus less on what your business does and more on why it does it. The “why” is powerful. It helps investors understand the motivation behind your business and the gap in the market that your business fills. It’s the “why” that brings your business to life and captures investor interest.

Don’t make assumptions when writing your business model.

What do you think an investor is looking for when they’re deciding which start-up to back? A solid five-year business plan, perhaps, or huge profit margins? The answer might surprise you. It’s assumptions. When an investor reviews your financial plan, they’ll look for signs that you’re inexperienced, immature, or deliberately misleading. These red flags occur when you haven’t spent time getting hard data to estimate your costs and market potential.

To show investors that you’ve done your homework, you don’t need to produce a detailed financial plan. But you do need to demonstrate that you fully understand your future customers and know how to use your resources to leverage market opportunity.

Investors are drawn to leaders.

It’s easy to feel disgruntled if you’re an entrepreneur in a small start-up community. You might dream of those vibrant cafés in Silicon Valley, Austin, and New York, certain that if only you were there, you’d easily find an investor while ordering your espresso.

But being part of a newer start-up community has an important benefit. It’s much easier to position yourself as a leader if you’re not in an overcrowded scene. Being a leader means being able to inspire a team, tackle competition, and convince customers your product is the best. These kinds of qualities win investor confidence.

Choose your founding team wisely.

If you’re like most entrepreneurs, you likely think that the concept behind your start-up is what investors care about most. But what’s actually more important is your team. After all, if you don’t have a solid team behind an idea, it’ll never come to fruition, even if it’s brilliant. If you want an investor to believe in your start-up, you need a team that can execute your vision.

Building an effective team can be a challenge, especially if your start-up began with you and a few friends tossing around ideas in a local bar. You and your friends probably share similar interests and experiences, which means you’ll likely end up with a team of cofounders who think in the same way. To avoid getting trapped in homogenized thinking, you’ll need to carefully plan who else comes on board.

Prepare thoroughly before pitching.

Congratulations! You have a brilliant idea, a well-researched financial model, and a fabulous team. So, it’s time to start pitching, right? Well, not quite.

Pitching to investors is much like a football team preparing for their weekly game. Before the team steps out onto the field, they study the playbook their coach put together. As founder, it’s your responsibility to create this playbook. Your pitching playbook will contain everything you could possibly need to provide to a potential investor, no matter what they ask for. It’s the best way to ensure you ace every pitch.

Create your own investor connections.

If you’re located outside a major start-up community, finding an investor might feel like an impossible task. You can fall into the trap of thinking that you don’t have the right connections to get seed funding.

While it’s true that it is easier to make connections in places like Silicon Valley, it doesn’t mean you have to know lots of investors when you begin to look for start-up capital. Regardless of where you’re located, you can form the connections you need. Of the initial $1 million that Belsito raised to kickstart eFuneral, two-thirds came from investors he didn’t know.

Your most important investment isn’t the biggest; it’s the first.

Investors are a bit like sheep. Very few of them want to take the lead, and they feel most comfortable in a herd. This means that most of them don’t like being the first investor in a new company. They want to feel confident that a start-up is worth investing in, and that confidence typically comes from seeing that other people have invested.

If you’re a first-time founder, this makes it very difficult to get that first investment check. If no one else has contributed to your seed funding, other potential investors will wonder if there’s something wrong with your business. On the other hand, if you have a few investors, they’ll view your start-up as trustworthy. That’s why you need to do whatever you can to secure that first investment.

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Worum geht es in Startup Seed Funding for the Rest of Us?

Startup Seed Funding for the Rest of Us (2015) provides insight into how to secure investors for your new business, even if you’re located outside a major start-up community. Its practical advice will explain how to make your business more attractive to investors and how to build the relationships you need to secure start-up capital.

Bestes Zitat aus Startup Seed Funding for the Rest of Us

Getting the investor to believe in the problem youre solving is half the battle in winning over investors.

—Mike Belsito

Wer Startup Seed Funding for the Rest of Us lesen sollte

Start-up founders looking for investors
Entrepreneurs working outside a major start-up community
Innovators wanting to commercialize a product

Über den Autor

Mark Belsito has over ten years’ experience working in start-ups as both an early employee and a cofounder. His businesses have been profiled by many major media outlets, including the Atlantic and the New York Times. Belsito works as an advisor to start-ups and is Entrepreneur-in-Residence in Lakewood, Ohio.

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